Balls says the law should not interfere with childcare arrangements between friends. Photograph: Kieran Doherty/Reuters

Friends who look after each other's children will no longer have to undergo criminal record checks and take childcare courses to make their arrangements legal, the children's secretary, Ed Balls, revealed today.

He has written to the children's services watchdog, Ofsted, saying the law should not interfere with reciprocal childcare arrangements between parents where money is not involved.

Regulations introduced in 2006 make it compulsory for anyone who babysits for another person's child for more than two hours at a time, or on more than 14 days per year, and receives a "reward" – either money or simply free babysitting in return – to register as childminders with the authorities. That involves going through criminal record checks and taking childcare courses.

Ministers have been trying to clear up confusion over the regulations in England in recent weeks, after two police officers were told they were breaking the law by looking after each other's young daughters.

Detective Constable Leanne Shepherd and her friend Detective Constable Lucy Jarrett, both 32, shared a job at Thames Valley police and had been taking turns looking after each other's daughters twice a week while they worked 10-hour shifts at Aylesbury police station in Buckinghamshire.

But Shepherd was told by an Ofsted inspector that the arrangement, which had been in placed for two and a half years, was illegal and must end immediately.

Balls told MPs that he had written to Ofsted chief executive Christine Gilbert saying the watchdog should not seek to regulate reciprocal childcare arrangements.

"I have agreed today with Ofsted that, with immediate effect, this will be beyond the scope of their childcare inspections and will make this crystal clear by changing the regulations in the coming period," he said.

A petition on the Number 10 website calling for the law to be changed has been signed by more than 20,000 people.

Balls said in his letter to Gilbert that it had never been the government's intention to intervene in such arranagements. He asked Oftsed to treat such situations as beyond its jurisdiction with immediate effect, and said he would be clariyfing legislation as soon as possible.

Sir Roger Singleton, the government's chief advisor on the safety of children, advised Balls that the government should not seek to regulate the "sensible and responsible" arrangements made by parents.

"Provided the arrangements have been freely entered into and are not complicated by payments from one parent to another, I consider that government should regard these as matters for parental discretion and decision."